Author: Howard Lindzon
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I have been writing about the incredible speed of money in venture over the last few weeks.
Tomasz Tunguz the great Redpoint investor (he has been on my panic podcast) has a great riff with some data on the velocity we are witnessing. He begins:
A venture dollar’s velocity has never been faster. The time it takes for a dollar to appear in an LP’s pocket, for the LP to wire it to a VC fund, and for the VC fund to invest can be measured in minutes. Then, hold your breath for the pre-emptive round, and you’ll have 3 term sheets before you pass out.
I’m kidding of course, but the hyperbole illustrates the velocity of money in Startupland. I’ve never seen a dollar move faster.
He finishes with…
With liquidity figures rocketing into space alongside Branson and Bezos, it’s no surprise to see the market behave this way.
VC fundraising will achieve a record. Valuations are at decade highs. There are 3-5 financings and M&A every working day. There’s an IPO every fourth or fifth day.
I wrote a post in 2015 called The Runaway Train of Late Stage Fundraising that examined the disparity between the number of growth rounds and unicorns versus the number of IPOs. If this year has shown us anything, it’s that the IPO and M&A markets have risen to the challenge; they’ve swelled to accommodate the team of unicorns born in the last decade.
And there’s nothing more enticing to an investor to double down and move money faster than gains.
Howard here again…
You should also be on guard for the incredible velocity of what I call ‘bad takes’. They are everywhere and coming fast and furious whether it is Robinhood’s IPO, crypto or the markets. I should know about the velocity because they are coming fast and furious from me too!
One of my favorite investing quotes and truisms is from Helene Meisler (an incredible investor and educator on all things investing)..
It will take a big price move down to change the current sentiment and velocity of money. That could come from some ‘human tragedy’ (we have seen that) buying exhaustion as supply keeps coming to fill the demand (I think that is how this bull market in US plays out) or as we have seen in China, the government, which just put the hammer down and changed price which changed sentiment.
Have a good one everybody.